For the last time, we're not hosting classes

The simple math behind the reason we pulled the plug

Oops!… I did it again.

I did that thing of thinking we should host classes in our studio space as a way of bringing in extra revenue. I wrote class descriptions, I posted them on our website, I even sold 6 (out of 8 available) slots to a terrarium class I taught earlier this month. I thought, “See? All we need is a regular calendar of events that people are used to seeing on the site, something we regularly talk about and promote, and we’ll regularly sell out classes.” This spring I put a lot of energy behind building a class calendar with a balance of floral and plant workshops and varying times and price ranges, and we even decided to host a floral workshop the week before Mother’s Day to try and capitalize on the holiday interest, even when it’s kind of busy for us.

While we almost sold out our terrarium class, after a couple of weeks of email and social media promotion, we had only sold 7 seats across the 4 remaining open classes (22% capacity). The question then: if it’s clearly not selling within the first few pushes, do we keep marketing classes this hard? (By contrast, I only have to send a couple of emails about holiday wreath making classes to sell out 4 or 5 classes.)

I’m sure consistency is part of marketing classes, however. Give people a chance to get used to the idea that we host classes before pulling the plug on them each time. This spring was going to be my last attempt at posting a class calendar that we gave a real fighting chance to. Let’s do a better job at hanging printed class calendars in the store, updating our Google My Business listings, posting the classes to Facebook… the works! We just need to keep the momentum going, I thought, and eventually the Fernseed class thing will be like a snowball that just gathers more snow as it rolls forward. Right?

In the end I pulled the plug, though, for the third and final time. WE ARE NOT GOING TO DO CLASSES. At all. Full stop. Probably even wreath classes (even though I’m still weird about saying goodbye to that sweet, sweet wreath class money). Let me bring you along with me in my reasoning.

I know we would ALL like to pay our people more. It’s hard when there’s a ceiling on how much you can make as a brick and mortar retailer in a single geographic area. For better or worse, I compare our hourly pay to what “really good” companies pay their employees for similar work. I convince myself that unless I pay that amount, I’m a terrible person. The way I used to go about figuring out if I could pay people whatever wage would make me a good person, was to go ahead and pay people that, then squeeze my eyes shut and hope every month we had enough cash left to make payroll. Often we didn’t, debt accumulated… you know the story of my business.

I can’t go through that process again where I squeeze my eyes and hope for the best financially while being a “good person” on the payroll side. I have to know before I give out raises: can the business support these raises?

But HOW does one go about figuring that out? How do we actually know what we can afford to pay people, and if we are already at the tippy top of that pay range?

I’ve kept to a payroll budget for a while, and even developed complicated spreadsheets to help me project what an hourly wage actually costs the business when you include taxes and time off, etc. What I haven’t been able to figure out is how to know when the business is doing well enough that our payroll budget itself can increase.

This week—THIS WEEK, I tell you—it occurred to me that our payroll budget is a percentage of gross sales, and that there has to be some kind of sweet spot between what that payroll number is and what sales are.

It occurred to me that that sweet spot is: A RATIO.

You know how they say your housing should cost you no more than 30% of your gross income, and that helps you decide what you can afford? (Please ignore how this advice seems ridiculous now with rising housing costs and just go with me for a moment.) Shouldn’t your payroll be a similar percentage of your gross sales?

WHY YES, YES IT SHOULD BE.

Your payroll to income ratio where red = payroll and green = gross revenue

Too much payroll and not enough sales means you’re overstaffed, people don’t have enough to do, and if you stay that way too long you’ll go into debt. Too little payroll and high sales means your team will burn out because they’re working too hard. The sweet spot is where you spend enough in payroll to support your sales, and your team, while busy, doesn’t feel overly taxed on workload.

I Googled, “payroll as percentage of gross sales benchmarks” and it turns out it’s between 15-30% of your gross sales depending on industry.

(Why don’t they tell you this stuff when you apply for a business license?)

Fernseed’s payroll sweet spot ratio is ~23-27% depending on season.

They really don’t encourage you to “know before you go,” when starting a business

I would add that if you still struggle to put enough cash into your bank accounts before payroll is due, you’re probably at your payroll cap, regardless of ratio. You might also consider whether you’re paying yourself a reasonable amount (and including yourself in the payroll percentage), or if your business has debt to pay down that must come from a percentage of profits. All these factor into what your payroll percentage should be, not just your industry. (Oh, also seasonality. But you know all this already I’m sure, since you have a business license.)

What does this have to do with offering classes at Fernseed?

My 2024 projected gross sales for Fernseed are $456,000. This is a conservative estimate, but one that I have to base our budgets on so there’s money left over to pay back debt. (Let’s cry a sweet, single tear that our 2021 gross sales were twice that.)

Of that $456,000 in sales, 0.55% of it comes from projected revenue from spring and summer classes and workshops, and 1% comes from wreath workshops at the end of the year. In all, classes account for less than 2% of our gross sales.

But classes are a lot of work, and they’re not part of our routine workflow. When we host a class, we not only have to develop and outline the class concepts, add them to the website, market and promote them, we have to stay open after hours to host them. (And I’m going to be honest with you since sharing this information puts to bed a common misconception about how classes help your business: 80% of the time, class attendees purchase nothing from the retail space before or after the class.)

When I was 27 years old, you bet I would have happily opened up my studio space to host a class 6 people paid $75 for if it meant I was making $450 and was still done with work by 8 p.m. I say this because for years, I was hosting classes at Fernseed with this mentality—like I’m still in my late twenties trying to sell vintage furniture, and teaching classes on refinishing a piece of furniture makes more money than actually refinishing a piece of furniture. But at Fernseed the same thing is not true. We don’t make as much money teaching classes about building bouquets as we make building bouquets. On top of that, it adds HOURS to our team’s workload every time we host a class.

Cleaning the workspace and bathroom: 1 hour
Setting up materials & supplies: 1 hour
Communicating with people who want to switch dates or cancel last minute: 30 minutes
Purchasing refreshments: 30 minutes, $15
Hosting the class: 2.5 hours
Cleaning up after the class: 1 hour

It seems like adding $2,500 in gross revenue (our spring and summer class sales projections) justifies that work, until you break it down into how it filters out through payroll, into the paychecks of the people who actually have to perform the additional work.

$2,500 gross revenue x 27% (overall payroll) = $675.00

Divided by 4 team members = $168.75 per year, or $14 per month, or $7 added to each paycheck

Would you do 6-7 hours of work for $7? That doesn’t even include the hours it takes to market, promote, structure and operationalize classes. And keep in mind we’re looking at a payroll as percentage of gross sales, so we’re not factoring in the cost of goods involved in class materials. If we sell 6 tickets to a class and gross $450, we spend at least $200 on materials and refreshments.

It’s just. Not. Worth it.

It’s not that we should turn up our nose at every opportunity to increase our top-line revenue just because it takes work, but we should ask ourselves whether the work it takes to execute additional revenue opportunities puts more strain on operations (and people, real people!) than the revenue itself is worth. Are we really that desperate for $7,000 extra dollars a year?

Well, yes.

But are there other ways to grow revenue by $7,000 that don’t require an entirely new vertical to be birthed and managed? Probably yes. You want to look for ways you can add a similar amount of revenue to your bottom line without having to do loads more work.

I know this sounds like a multi level marketing scam intro, but really it’s a deprogramming of the mindset that in order to make a little bit more revenue, you have to work a lot harder.

We cannot work harder, in part because we need to always be preparing for what happens when all hell breaks loose. Do I have the mental bandwidth to host this class and deal with the car crashing into our business? To teach a class while being audited? To teach a class when two other people on our four-person team called in today? I’m saying this not just for Fernseed, but for anyone running a brick and mortar business that faces the public. Can you still do everything that needs to be done that day just to maintain baseline operations AND ALSO take on that extra work?

We should always be conserving 20% of our energy for mayhem, honestly.

Finally, I need to come clean about something. I don’t like hosting classes. I don’t think my team does either! And we don’t like it for different reasons. Some people don’t like public speaking, full stop. Others feel they need to spend a lot of time preparing before they can explain a process to others and they still have imposter syndrome while doing it. It doesn’t feel fun!

Me? I love speaking in front of people and hosting… but I’m still struggling with talking to people about plants. It’s a hangover of pandemic stress that I keep thinking will go away, but never does. I literally go into fight or flight talking about plant care for more than a minute. When I did the terrarium class I had to suck on a cough drop the entire time to keep my mouth from drying out completely. It just never gets better.

There’s nothing wrong with working hard to bring in a little extra money if you love what you’re doing and you’d do it even if you weren’t getting paid. But on a good day we don’t love it, and on the worst days, it’s causing anxiety.

So this week we decided to cancel the spring classes we already sold due to slow ticket sales. We had put in the amount of work we wanted to put in to launch and promote them, they hadn’t sold to our expectations, and we didn’t think it was worth it, especially armed with this new formula and understanding, to put more work in.

It’s not easy to pull the plug on something you’ve acted in full confidence like you were going to do. We did, in good faith, think this was the turning point and that classes were finally going to sell like we’ve always hoped they would. But they didn’t. Again. So rather than go through with classes that were less than a quarter full, we emailed anyone who had booked up to this point to let them know we were cancelling the full spring lineup due to lack of attendance. Anyone who had signed up would be given a full refund effective immediately.

And after all it was only 7 people!

Would I rather disappoint 7 people (and probably pretty mildly, honestly — are people really that dead set on attending a class at Fernseed?) or stress myself and everyone on my team out by adding another thing to our plates while we still have cars driving into the front of the building?

Looking at it that way, it’s an easy choice.

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